2012 Discussion Papers
School of Economics Discussion Paper 12/11
The Financial Market Impact of
UK Quantitative Easing
Francis Breedon, Jagjit S. Chadha and Alex Waters
University of London and University of Kent
After outlining some of the monetary developments associated with Quantitative Easing (QE), we measure the impact of the UK's initial 2009-10 QE Programme on bonds and other assets. First, we use a macro- finance yield curve both to create a counterfactual path for bond yields and to estimate the impact of QE directly. Second, we analyse the impact of individual QE operations on a range of asset prices. We fi nd that QE signi cantly lowered government bond yields through the portfolio balance channel by around 50 or so basis points. We also uncover signi cant effects of individual operations but limited pass through to other assets.
JEL Classification: E43; E44; E47; E58
Keywords: Term Structure of Interest Rates; Monetary Policy; Quantitative Easing
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